I do not own this stock of SNC-Lavalin Group Inc (TSX-SNC, OTC-SNCAF), but I used to. I have sold my stock in SNC-Lavalin (TSX-SNC, OTC-SNCAF). I have given up hope that there will be any sort of resolution for this company anytime soon. However, I must admit that it is currently perking up. I live off my dividends and they have cut the dividends twice last year. Dividend yield is really low at just 0.3%
The Investment Reporter has removed this stock from their Key Stock List and Issued a sell on the stock . The largest shareholder and a shareholder for lots of Quebec companies of Caisse de Depot et Placement du Quebec seems to be losing patience with this stock also. Victor Ferreira on Financial Post says analysts slash target prices and stock price fell 10%. I sort of regard selling now.
When I was updating my spreadsheet, I noticed I sold at a low point. Although if I did buy it, I would probably not do as well as I had in the past. I had this stock for 20 years and my Total Return was 23.16% per year with 19.73% from capital gains and 3.43% from dividends.
The dividend yields are low with dividend growth mixed. The current dividend yield at 0.33% is low (below 2%). The 5 year median dividend yield at 2.16% is moderate (2% to 4% ranges). The 10 year median and historical median dividend yields are low at 1.98% and 1.56%.
Dividend increases were good (mostly above 15%) until 2011. Dividend increases were then low (below 8%) until 2019 when they cut the dividends by 80%. See chart below.
The Dividend Payout Ratios (DPR) are improving. The DPR for EPS for 2019 is 13% with 5 year coverage at 415%. This s because of an earnings loss in 2018. The DPR for CFPS for 2019 is 483% with 5 year coverage at 48%. Analysts expect the long term coverage to be better. The DPR for Free Cash Flow for 2019 and 5 year coverage is not calculatable because of negative FCF. For this stock, Wall Street Journal and Morningstar agree on FCF. Analysts expect the FCF to turn positive this year and coverage to be at 200%.
Debt Ratios could be better, but I give them a pass. The Long Term Debt/Market Cap Ratio is 0.32. The Liquidity Ratio is low at 1.14. You have to add back the current portion of the long term debt to get a better one which would be 1.25. Add in cash flow after dividends, it is lower at 1.23. I like to see this ratio at 1.50. The Debt Ratio is a bit low at 1.47 with a 5 year ratio at 1.59. The Leverage and Debt/Equity Ratios are a bit high at 3.13 and 2.13 respectively.
The Total Return per year is shown below for years of 5 to 31 to the end of 2019. Under the Capital Gain column is the portion of the Total Return attributable to capital gains. Under the Dividend column is the portion of the Total Return attributable to dividends. See chart below.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2014 | 5 | -24.21% | -5.18% | -7.53% | 2.35% |
| 2009 | 10 | -8.76% | -3.59% | -5.72% | 2.13% |
| 2004 | 15 | 1.81% | 5.84% | 2.96% | 2.88% |
| 1999 | 20 | 5.65% | 15.59% | 11.10% | 4.49% |
| 1994 | 25 | 7.80% | 14.11% | 10.44% | 3.66% |
| 1989 | 30 | 12.11% | 14.46% | 11.00% | 3.47% |
| 1988 | 31 | 9.23% | 19.98% | 14.58% | 5.40% |
Because the stock price has dropped some 20% year to date, I thought I would show the same chart but with value to date. However, even with this drop, it does not change what long term investors are earning by very much.
| From | Years | Div. Gth | Tot Ret | Cap Gain | Div. |
|---|---|---|---|---|---|
| 2015 | 5 | -24.21% | -8.32% | -10.37% | 2.05% |
| 2010 | 10 | -8.76% | -6.78% | -8.80% | 2.02% |
| 2005 | 15 | 1.81% | 2.40% | -0.44% | 2.84% |
| 2000 | 20 | 5.65% | 13.35% | 8.50% | 4.84% |
| 1995 | 25 | 7.80% | 12.87% | 8.72% | 4.15% |
| 1990 | 30 | 12.11% | 13.60% | 9.65% | 3.95% |
| 1988 | 32 | 9.23% | 19.40% | 13.28% | 6.12% |
The 5 year low, median, and high median Adjusted Price/Earnings per Share Ratios are 13.69, 17.11 and 25.16. The corresponding 10 year ratios are 15.35, 19.11 and 25.05. The corresponding historical ratios are 13.87, 19.11 and 23.90. The current P/E Ratio is 11.79 based on a stock price of $22.80 and 2020 EPS estimate of 1.94. This stock price testing suggests that the stock price is relatively cheap.
The 5 year low, median, and high median Price/Adjusted Earnings per Share Ratios are 15.80, 18.63 and 22.69. The corresponding 10 year ratios are 15.35, 19.11 and 25.05. The current P/AE Ratio is 9.79 based on a stock price of $22.80 and 2020 EPS estimate of 1.94. This stock price testing suggests that the stock price is relatively cheap.
I get a Graham Price of $30.38. The 10 year low, median, and high median Price/Graham Price Ratios are 1.31, 1.56 and 1.85. The current P/GP Ratio is 0.75 based on a current stock price of $22.80. This stock price testing suggests that the stock price is relatively cheap.
I get a 10 year median Price/Book Value per Share Ratio of 2.39. The current P/B Ratio is 1.08 based on a stock price of $22.80, Book Value of $3,712M and a Book Value per Share of $21.15. The current ratio is 55% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
I get an historical median dividend yield of 1.56%. The current dividend yield is 0.35% based on a stock price of $22.80 and dividends of $0.08. The current yield is 78% below the historical median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
I get a 10 year median dividend yield of 1.98%. The current dividend yield is 0.33% based on a stock price of $22.80 and dividends of $0.08. The current yield is 82% below the 10 year median dividend yield. This stock price testing suggests that the stock price is relatively expensive.
The 10 year median Price/Sales (Revenue) Ratio is 0.88. The current P/S Ratio is 0.48 based on 2020 Revenue estimate of $8,763M, Revenue per Share of $49.82 and a stock price of $22.80. The current ratio is 48% below the 10 year median ratio. This stock price testing suggests that the stock price is relatively cheap.
Results of stock price testing is that the stock price is probably cheap. A number of the stock price tests, such as P/S Ratio, P/B Ratio and P/GP Ratio show the stock price as cheap. These are good tests. They also provided an Adjusted EPS where a test shows the stock price as cheap. Companies have Adjusted EPS when they feel that the EPS, done in the normal method does not correctly reflect what the company is earning.
The dividend yield test that show the stock price as expensive is really a warning. It is showing it was expensive because dividends have been cut because the company cannot afford them. This is a negative. Also, the P/S Ratio test show the stock as cheap, but not very cheap, like the other tests. A cheap P/E Ratio is one below 10.00. This might point to the fact the EPS have not been good lately and a look at the spreadsheet confirms this.
Is it a good company at a reasonable price? In a lot of ways, I still like this company. It is cheap. I do wonder if it is cheap enough for all the possible problems that the government might still come up with. You also cannot just put their cheapness down to the current bear market. I am not buying at present. Part of the reasons is the uncertainty of whether their troubles are over and part is that I never buy stocks with a dividend less than 1.00%.
But make no mistake, they do have their problems. They were having troubles going back quite a number of years. As I recall, the company fired Riadh Ben Aissa back in 2012. There was an article in March 2015 in the National Post on the problems at that time. As a shareholder, you think at different times that their legal problems are finished and then the government starts more actions. You have to wonder if there is ever going to be an end.
When I look at analysts’ recommendations, I find Strong Buy (5), Buy (6) and Hold (2). The consensus would be Strong Buy. The 12 month stock price consensus is $35.96. This implies a total return of $58.07% with 57.72% from capital gains and 0.33% from dividends.
See what analysts are saying on Stock Chase. A number do not like this company. Aditya Raghunath on Motley Fool says to stay away from this stock. Summary on Simply Wall Street is good for the Risk Analysis section. A writer on Simply Wall Street talks about ownership of stocks in his company. Christopher Reynolds on Global News talks about the dividend cut and why.
SNC-Lavalin Group Inc is a fully integrated professional services and project management firm that offers a wide range of services, including financing, consulting, engineering and construction, procurement, and operations and maintenance. Its web site is here SNC-Lavalin Group Inc.
The last stock I wrote about was about was Barclays PLC ADR (LSE-BARC, NYSE-BCS) ... learn more. The next stock I will write about will be Fortis Inc (TSX-FTS, OTC-FRTSF) ... learn more on Friday, April 24, 2020 around 5 pm. Tomorrow on my other blog I will write about Surviving Bear Markets .... learn more on Thursday, April 23, 2020 around 5 pm.
Also, on my book blog I have put a review of the book The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper with Denise Hearn learn more...
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